If you’ve spent years saving for retirement, you probably don’t plan to spend all your savings. But unfortunately, if you’re not careful, it can happen.
Find out: Retirement planning: How much the average person under 70 spends monthly
Learn more: The surprising way to get a guaranteed retirement income for life
To ensure you spend your retirement years financially stable and comfortable, beware of common mistakes that have derailed even wealthy retirees.
Rich people know the best money secrets. Learn to copy them.
Taking excessive risks
There is a time and a place for taking financial risks, and it’s not retirement.
Wealth advisor Sharon Hayut, senior managing director at Magnus Financial Group, has seen this play out among her clients.
“As an advisor, I often see people taking excessive risks in retirement, leaving them vulnerable to market corrections.”
There’s a term for this risk: sequence of returns risk. The long-term average returns on your investments are important, but so is when you earn high returns compared to losses. A market crash early in your retirement can wipe out a large portion of your portfolio that will never recover.
That same market crash a decade later could keep your portfolio chugging along over the long term, because it had a chance to grow before the next bear market.
Read next: Saving for retirement: 4 expenses retirees regret including in their budgets, according to experts
Lack of an emergency fund
Hayut added that emergency funds are not just for those who are still working.
“Another common mistake is not having an emergency fund with at least six months of expenses to cover unexpected expenses, whether it be for medical care or something as simple as needing a new car. When these mistakes occur, they can significantly impact a person’s financial stability and peace of mind.”
Without a cash emergency fund, many retirees have to sell their investments even if they suffer losses during a down market. Avoid forced liquidations during retirement as much as possible.
Pay high taxes
Whether you are retired or not, you will have to pay taxes. But with careful planning, he may be able to reduce the amount he pays.
“Not using tax-advantaged accounts enough is a common mistake,” said Mike Falahee of Marygrove.com. “Roth contributions are taxed upfront, but not taxed, and withdrawals are not taxed in retirement.”
When the government takes less of your income in retirement, you don’t need as much gross income to survive. That, in turn, means you don’t need to save as much in your savings.
Not adapting to change
When your circumstances change, your expenses should change too.
“Retirees often do not adjust their financial plans in response to changing circumstances,” Hayut said. “Life events, such as the death of a spouse, unexpected medical expenses or financial crises, can significantly affect your financial situation. Periodically reviewing and adjusting your retirement plan can help you stay on track and make the necessary changes to avoid financial hardship.”
Pay high withdrawal fees
Hayut said: “To avoid financial mistakes it is necessary to plan carefully, spend with discipline and periodically review finances. “It is important to work with a proactive advisor who can help retirees ensure their savings last throughout their retirement.”
This happened to Cem Oezulus, who immigrated to the United States and co-founded a small company called The Brot Box. He retired comfortably, but has since had to adapt on the fly.
“Retiring wealthy, I didn’t expect excessive spending and high withdrawal rates to deplete my savings so quickly,” Oezulus said. “Poor investment decisions and lack of diversification increased financial stress. “These mistakes forced me to drastically modify my lifestyle and adopt a more cautious financial approach.”
Ignore available benefits
Most people don’t realize how many benefits they qualify for or how many programs are available to them.
Attorney Marty Burbank of OC Elder Law sees this all the time among his retired clients.
“Many of my clients, especially military veterans, were not fully aware of the benefits available to them through programs like Aid and Attendance. I once worked with a veteran who lost thousands of dollars in benefits simply because he didn’t know how to apply.”
Burbank added: “Taking advantage of all potential sources of income and support can make a significant difference in retirement security.”
Whether you retire with $300,000, $3 million, or $30 million, you can lose it all if you’re not careful.
Avoid overspending, have an emergency fund, and if possible, meet with a financial advisor or planner. You don’t have to give them all your money to manage it for you; You can simply pay a flat or hourly rate to receive expert advice.
It could make the difference between a comfortable retirement and one where you spend all your time saving.
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This article originally appeared on GOBankingRates.com: 6 Financial Mistakes Retirees Make That Force Them To Change Their Lifestyle
